5 Areas Where You Can Begin Investing in Real Estate

If you are new to the real estate investment scene and are excited to build your portfolio but are unsure where to begin, don’t worry. You’re not alone. It’s likely that your peers all have different opinions and advice that often contradict each other causing you some confusion and indecision. It’s true that there are many different ways that you can begin investing in real estate and all have their advantages as well as their own risks. We suggest putting all of the various investments options into categories and addressing them from this more organized point of view. Doing this will help you gain a clearer understanding of what is involved with each one to help you move forward. There are five major groups that the majority of real estate investments fall into. What follows is a brief explanation of each one.

Residential

Any properties that are tied to or involve a dwelling where someone lives, such as an apartment or home, are categorized as residential real estate investments. This category also includes such properties that involve a service business aspect, such as full-service luxury tenant buildings and assisted living accommodations. 12 to 18-month leases are common for this type of investment, making the residential category the most susceptible to changing marketing conditions.

Commercial

This category is made up mainly of office buildings. Different from the one-year leases of residential investments, these leases often last years, which has its pros and cons. Even if lease rates on similar properties go down, cash flow will continue because the tenant is in a long-term commitment (at high prices, most likely) and the investment is fully leased. But often times the opposite is, in fact, true because if the lease rates happen to increase after you already agreed to a long-term lease, you will probably be earning low lease rates that are below market.

Industrial

Retail

Here, you’re dealing with properties like traditional malls, strip malls, and shopping centers. You’ll be dealing with a wide variety of tenants when investing in retail, like restaurants, hair salons, retail shops, and others. Where lease rates are concerned, there’s a good chance that you would be dealing with a situation that involved acquiring a percentage of the sales the retail store produces. Typically this will incentivize landlords to be more invested in the commercial success of their tenants and will sometimes get involved in various ways to make sure that the business has a high chance of succeeding.

Mixed-use

This category is essentially where we group hard-to-categorize properties; ones that involve more than one of the real estate investment types above. As an example, a restaurant or retail establishment may reside on the ground floor of a building with multiple stories, of which could include residential apartments or office space. This is just one example of many that would be grouped into the mixed-use category.